15 February 2012 11:20 [Source: ICIS news]
By Linda Naylor
LONDON (ICIS)--Polypropylene (PP) net spot prices in Europe have risen by over 20% so far this year, to an eight-month high, as producers close February order books and only offer new volumes at higher prices amid expectations of another increase for March propylene, sources said on Wednesday.
“Producers are no longer selling at early-Feb prices,” said one player. “There is not one kilo of special offer out there.”
PP prices for the first half of February rose by at least €100/tonne ($132/tonne), with some producers implementing hikes of €120/tonne and sometimes more. Currently, most are either not selling at all or only selling at yet-higher levels than they did in early February.
“Material is not exactly short, but it’s not long either and with everybody expecting a big hike in the March propylene contract price prices can only go up again next month,” said a trader.
Homopolymer injection net spot prices are now trading at €1,260-1,300/tonne FD (free delivered) NWE (northwest Europe), from a level of €1,040/tonne at the end of December, representing a increase of more than 20%.
The upward push has been prompted by poor cracker and polymer margins, as crude oil and naphtha prices continue to be very firm. On Wednesday, Brent crude oil was trading at $118.16/bbl, with naphtha at $1,040-1,080/tonne CIF (cost, insurance and freight) NWE.
Production has been cut at the cracker and polymer level for many weeks, as producers brought high October and November stocks under control.
The final demand picture in Europe is not clear at present, and there is some fear that the hefty hikes seen recently and also expected in March will only attract more imports.
“They are opening all the doors and windows into Europe,” said a trader.
Offers of PP from the Middle East are made into Europe but levels are no more attractive than current offers from western European producers, and sometimes above.
“It’s a gamble,” said one potential buyer. “It all depends on how much propylene increases in March.”
Some buyers said that they were building stock in anticipation of a March increase.
“Our demand is below what we expected but we are taking our full contracted volumes to be able to have a buffer next month,” said one large buyer.
On the whole, however, most players see a big increase in PP prices in March as inevitable, but most players move with caution as the outlook is cloudy for the second quarter of 2012.
PP is used widely in the packaging and automotive sectors.
($1 = €0.76)
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